A new research study released today by Kinetic Partners, the global professional services firm, reveals that 83% of financial services CEOs believe that a company’s culture to be the most important factor to get right in order to solve their firms' regulatory challenges. This figure jumped even higher for Chief Compliance Officers – 91% of whom see culture as the key challenge. Kinetic Partners’ Global Regulatory Outlook research study reflects the views of senior executives within the banking, asset management and hedge fund industries, and includes contributions from Howard Davies and Howard Flight.
Julian Korek, Founding Member of Kinetic Partners and one of the authors of the study, said:
“The culture within any company is set by the CEO – and it’s good that our CEOs recognize that and recognize the symbiotic link between culture and compliance. Getting the culture right so that people make the right choices is essential for financial services firms, and will define the way the firm does business and the way it interacts with clients and prospects. That’s why so many of the industry leaders we spoke to see this area as key battleground in terms of getting regulation right – but also as a potential minefield.
“In the UK, the FCA has made a commitment to visit every firm at least every four years, and one key focus of the visits is to assess if senior management is creating the right culture.”
“The financial crisis has moved national financial stability to the very top of the regulatory agenda, and has therefore caused a shift away from the global integration of financial services and towards more localized regulation instead. As a result, we can already see some diversity between regulators, leading to significant differences in interpretation across several countries or regions.”
Other findings of the Global Regulatory Outlook research study also reveal the impact that cultural differences could have on cross-border trading, such as:
More than two-thirds (66%) of the senior managers questioned felt that a company’s culture was the most important part of the governance function to get right in order to avoid significant regulatory problems, compared with finding staff with the right regulatory skills (3%) and a relationship with the regulator (1%).
Although the majority of respondents stated that the availability of commercial opportunities has the most influence on where they look to do business, the existence of local regulatory requirements was listed as the second most important factor.
Julian Korek concluded:
“A move towards centralized, cross-border regulation is inevitable for banks, but the debate about its suitability for the rest of the financial services industry is still ongoing. The industry’s argument is that national regulators better understand the culture of their own jurisdictions, and many regulators have accepted the legitimacy of this argument. As a result, it’s unlikely that we’ll ever see centralised regulation for the entire industry.”